Industrial Relations Commission of New South Wales CITATION: Brien v Harrisons Timber and Hardware [2005] NSWIRComm 1115 APPLICANT Adam Matthew Brien PARTIES: RESPONDENT Harrisons Timber and Hardware FILE NUMBER(S): 6889 of 2003 CORAM: Cambridge C CATCHWORDS: Unfair dismissal - costs - unreasonable failure to agree to a settlement of the claim - indemnity costs refused - costs granted on usual basis. LEGISLATION CITED: Industrial Relations Act 1996[NSW] Bankstown City Council v Paris (1999) Full Commission of Industrial Relations Commission of NSW [Wright P, Peterson J & Bishop C], 93IR 209. CASES CITED: Four Sons Pty Limited v Sakchai Limsiripothong (No 2), (2000) Full Commission of Industrial Relations Commission of NSW [Wright P, Hungerford J & Cambridge C] 100IR 400. HEARING DATES: 06/20/2005 DATE OF JUDGMENT: 07/19/2005 APPLICANT Mr P Bruckner of Counsel Solicitor, Mr K Solari LEGAL REPRESENTATIVES: RESPONDENT Mr A Britt of Counsel Solicitor, Ms J Williams of Timber Trade Industrial Association DECISION: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES COMMISSIONER CAMBRIDGE 19 July 2005 Matter No IRC 6889 of 2003 Adam Matthew Brien -V- Harrisons Timber And Hardware Application by A Brien re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996. DECISION ON COSTS [2005] NSWIRComm 1115 1 This Decision involves an application for costs made on behalf of the successful applicant in this matter, Adam Matthew Brien, (the applicant). The applicant has sought Orders for costs in respect of proceedings arising from his application for unfair dismissal which was made pursuant to section 84 of the Industrial Relations Act 1996 [NSW], (the Act). 2 The applicant was successful in obtaining Orders for compensation made pursuant to sections 89(5) and 89(6) of the Act against Harrison's Timber Pty Limited trading as Harrison's Timber n' Hardware, (the employer). The Orders for compensation were included in the Decision issued in this matter on 25 January 2005. Following that Decision the solicitors acting for the applicant formally requested that the Commission provide an opportunity for the applicant to be heard on the issue of costs. 3 The issue of costs was the subject of Mention proceedings held on 28 February 2005. The Commission was advised that the question of costs was contested and Directions were made for the filing of evidence and other material regarding the issue of costs. Subsequently a Hearing regarding the question of costs was conducted on 20 June 2005, at which time the Commission reserved Decision. THE CASE ADVANCED ON BEHALF OF THE APPLICANT SEEKING COSTS 4 Mr P Bruckner, a barrister, appeared for the applicant at the Hearing on Costs. Mr Bruckner sought to rely upon two affidavits of Kelvin Solari which were admitted by consent and respectively marked as Exhibits C1 and C2. Mr Solari was called to provide evidence as a witness and he was cross-examined during the Hearing on Costs. 5 Mr Bruckner filed written submissions on costs on 30 March 2005, which he supplemented with oral submissions. 6 Mr Bruckner submitted that the employer had unreasonably failed to agree to a settlement of the claim. Mr Bruckner submitted that the employer's unreasonable approach to settlement of the matter opened what he described as the "jurisdictional gateway" to costs. Mr Bruckner further submitted that the circumstances of this case satisfied the particular requirements to provide for costs to be made on an indemnity basis. 7 Mr Bruckner referred to his written submissions and recounted the circumstances regarding the attempted conciliation of the matter which occurred on 17 December 2003. Mr Bruckner submitted that the features of the various offers regarding settlement should lead the Commission to conclude that the respondent ended settlement discussions by boldly stating that it had no case to answer. Mr Bruckner submitted that the employer's approach to conciliation proceedings was reflected by their bold declaration that they had no case to answer. Mr Bruckner submitted that an analysis of the conduct of the employer should establish that they had no intention to settle the matter on any reasonable basis. 8 Mr Bruckner then made further submissions about Orders for costs being made on an indemnity basis. Mr Bruckner submitted that there were special circumstances which would justify indemnity costs. Mr Bruckner submitted that it was difficult to conceive of a worse example than the approach adopted by the employer at Conciliation proceedings, except where someone failed to attend or refused to negotiate at all. Mr Bruckner submitted that the Commission should be satisfied that the circumstances in this instance provided basis for costs Orders to be made and that those costs should be made on an indemnity basis. THE CASE ADVANCED BY THE EMPLOYER AGAINST COSTS 9 Mr A Britt, a barrister, appeared for the employer at the Hearing on Costs. Mr Britt provided the Commission with the respondent's written submissions on costs. Mr Britt made further supplementary oral submissions urging the Commission to refuse the applicant's request for costs. 10 Mr Britt recounted the chronology of relevant events relating to the attempted settlement of the claim. In this respect Mr Britt stressed that the employer had attended and participated in the Conciliation proceedings. 11 At the Conciliation proceedings held on 17 December 2003, the employer was first advised of the applicant's collateral claim regarding underpayment of wages. Mr Britt criticised that the applicant's solicitor did not particularise the details of the collateral underpayment claim. Mr Britt submitted that an analysis of the offers that were made both on record during the Conciliation proceedings and during private discussions between the Parties, should not establish any finding that the employer had acted unreasonably in the pursuit of settlement. On the contrary, Mr Britt submitted that the offers made by the applicant actually increased the amount that he sought as settlement for the unfair dismissal claim. 12 Mr Britt also referred to correspondence from the applicant's solicitor dated 22 December 2003, (Exhibit C1 - Annexure "B"), which indicated that the applicant was no longer pursuing compensation but had decided to seek reinstatement as remedy for his alleged unfair dismissal. Mr Britt said that the applicant's position as conveyed in the correspondence of 22 December 2003, allowed for the employer to conclude that the applicant was not pursuing any further conciliated settlement of the matter involving anything other than reinstatement. 13 Mr Britt further submitted that the evidence did not reflect any lack of belief on the part of the employer as to the strength or otherwise of its case. Mr Britt submitted that although the employer's position was ultimately rejected by the Commission it was a position that was genuinely held particularly at the time of the attempted conciliation. 14 Mr Britt made further submissions which asserted that there was no case to be made out to provide for the opening of the "jurisdictional gateway" and further, that there were no special circumstances such as to provide for any indemnity costs as sought by the applicant. CONSIDERATION 15 There are two notable features of the evidence concerning the Parties conduct in pursuit of settlement of this matter. 16 Firstly, the transcript of Conciliation proceedings of 17 December 2003, records the employer's very firm view regarding any increase in respect to its position for settlement of all claims for the total figure of $2000.00. Ms Williams, a solicitor, who represented the employer during the Conciliation proceedings, enunciated the employer's firm position as the following extract from transcript records: "COMMISSIONER: What does the respondent say to that? WILLIAMS: No, Commissioner. We offered that $2000 to settle everything. We don't believe we have a case to answer in relation to unfair dismissal so - - COMMISSIONER: You say that in a case where apparently there's no documented record of anything relating to the actual dismissal. WILLIAMS: We've got documents of every meeting that was held between the applicant and the managing director and the sales manager. This happened every week; between two and a half to three hours every week. We have documents in relation to those meetings. COMMISSIONER: So what's the respondent's position regarding settlement? WILLIAMS: Not on the basis - the reason that we offered the $2000 was to settle everything. COMMISSIONER: Yes, I understand that. WILLIAMS: So the answer is no, we won't settle for - the $2000 is rejected if it doesn't settle the whole employment issue. COMMISSIONER: Do you want to advance any further prospect for settlement of the claim? WILLIAMS: My instructions are no further increases to that. It would be $2000, all up, to settle all the employment issues in relation to this applicant. COMMISSIONER: You don't propose anything in excess of that? WILLIAMS: No. COMMISSIONER: You do so cognisant of the potential costs implications of adopting such an approach? WILLIAMS: Yes" Transcript of proceedings (17/12/03) @ page 9. 17 The second important aspect of evidence regarding the pursuit of settlement involved the letter from the applicant's solicitor dated 22 December 2003, (Exhibit C1 - Annexure "B"). This letter referred to the Conciliation that had been conducted before the Commission on 17 December, and formally stated the applicant's claim for reinstatement. Although this correspondence might seem to have elevated the applicant's claim, having made no mention of further financial settlement, it importantly invited the employer to respond. Regrettably there was no response to the applicant's correspondence of 22 December 2003 at all. Particularly as this correspondence was between representatives as opposed to unrepresented Parties, it was unusual for there to be no reply, not even advice of a complete rejection of the applicant's position. 18 The evidence of the conduct of both Parties in the pursuit of settlement must be considered in the context of the statutory provisions regarding any Order for costs in unfair dismissal matters. In this case the application for costs was taken under that part of section 181(2)(c) of the Act which requires the Commission to find that the employer had unreasonably failed to agree to a settlement of the claim. During the Hearing on Costs, both Parties referred the Commission to the major Full Bench Authorities that have involved an analysis of conduct that can be regarded as an unreasonable failure to agree to a settlement of an unfair dismissal claim. The Commission was taken to Authorities such as Bankstown City Council v Peter John Paris (Paris) Bankstown City Council v Paris (1999) Full Commission of Industrial Relations Commission of NSW [Wright P, Peterson J & Bishop C], 93IR 209. and Four Sons Pty Ltd v Sakchai Limsiripothong (No 2), (Four Sons) Four Sons Pty Limited v Sakchai Limsiripothong (No 2), (2000) Full Commission of Industrial Relations Commission of NSW [Wright P, Hungerford J & Cambridge C] 100IR 400.. 19 The Judgements in Paris and Four Sons make it clear that in any assessment as to whether a Party's conduct could constitute an unreasonable failure to agree to a settlement of the claim, it is necessary to analyse whether that Party made a careful and reasonable assessment of the prospects for success or failure of their case. It would seem that if the Commission ultimately found that a Party significantly misjudged the strengths and weaknesses of its case whilst in possession of material relevant to such an appropriate determination, such failure would likely provide proper basis for costs Orders to be made against that Party. 20 It is relevant to acknowledge that consideration of any misjudgement of the strengths and weaknesses of an unfair dismissal case should include recognition as to whether that Party was represented or unrepresented. It would seem to be unreasonable to apply similar standards to unrepresented Parties as might be anticipated for circumstances where both Parties had been represented throughout proceedings. 21 Further, it is relevant to mention that consideration of costs Orders must acknowledge that the Act establishes a framework which, in the main seeks to avoid costs and therefore there must be some natural reluctance to grant any Order for costs. However the Legislative framework also emphasises a requirement on Parties to conduct themselves in a manner which promotes conciliated settlement of unfair dismissal claims. There are obvious public interest considerations in reducing the number of claims which require Arbitrated Determination. 22 In this instance it is difficult to understand why the employer took such a firm position regarding settlement above the $2,000.00 figure as revealed during the Conciliation proceedings. It appeared that there may have been some personal animosity that emerged during the private discussions that the Parties had during an adjournment of the Conciliation proceedings. Representatives should guard against any such difficulties being translated into an unreasonable position, as might be subsequently identified on record, as opposed to anything that may or may not have been said in private discussions which did not involve the Commission. 23 It is also particularly important for representatives of Parties in unfair dismissal proceedings to properly test the apparent intransigence of the other side to settlement propositions. Although the applicant's letter of 22 December 2003, appeared to convey a hardening of the claim as opposed to any further suggested compromise, the employer's representative had a responsibility to formally reply even if such reply involved clear rejection of the applicant's proposition. The absence of any response whatsoever essentially compelled the applicant to pursue the matter through to Hearing as opposed to any further communication regarding settlement. In effect the absence of any response by the employer to the applicant's letter of 22 December 2003, compelled the applicant to take the matter to Trial. 24 The applicant has sought costs Orders on an indemnity basis. Following careful consideration of the discretion regarding costs to be provided on an indemnity basis, it would seem that it is necessary to establish some exceptional or special circumstances before granting costs on an indemnity basis. As was mentioned by Mr Britt, it might be anticipated that a refusal to attend Conciliation proceedings and answer the claim in any way whatsoever might provide for such exceptional or special circumstances. It must also be noted that at Conciliation the employer did increase its offer to settle but regrettably went no further. 25 Consequently it would appear that the employer's approach to settlement in this instance, although unreasonable, would not amount to conduct that was highly irregular or even perhaps improper such as to provide for costs to be Ordered on an indemnity basis as opposed to the ordinary Party - Party basis. CONCLUSIONS 26 This application for costs has involved an examination of the conduct of the Parties in pursuit of settlement and an application of relevant Principles and established Authority. The applicant has sought that the Commission find that the employer's conduct represented an unreasonable failure to agree to a settlement of the claim and has further sought that costs be provided on an indemnity basis. 27 Having carefully considered the evidence of the relevant conduct of the respective Parties, and having regard for the relevant Principles that should be applied to a costs application, the Commission concludes that the applicant's claim for costs should succeed. 28 In particular the Commission concludes that the employer's approach to settlement of the claim was unrealistically rigid at the time of Conciliation proceedings and did not involve a careful assessment as to the strengths and weaknesses of its case. In addition the failure of the employer to in any way respond to correspondence from the applicant's solicitors after the Conciliation proceedings is an unusual failure to meet a fundamental obligation. This also had the unfortunate consequence of forcing the applicant to take the matter to Trial and ultimately Determination. 29 Consequently the Commission concludes that the employer unreasonably failed to agree to a settlement of the claim, particularly in respect to the position adopted formally on record during Conciliation on 17 December 2003. Further, the absence of any response to the applicant's letter of 22 December 2003, is found to represent a course of conduct that was inconsistent with an intention to settle the matter on any basis that might emerge as reasonable. 30 The applicant has sought that costs be provided on an indemnity basis. The Commission concludes that the special circumstances that provide for the exercise of the discretion to Order costs on an indemnity basis do not exist in this instance. Therefore costs Order shall be provided on the usual basis. ORDERS Further to the Decision and Orders of the Commission issued in this matter on 25 January 2005, the Commission hereby makes the following Orders as to Costs: 1. The employer is Ordered to pay the applicant's costs in respect of these proceedings and of an amount as agreed or assessed. 2. Unless assessment of the amount of costs as provided for in Order 1 above is required, the employer shall pay the costs as Ordered within twenty one days from the date of this Decision. oooOOOooo DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.